This is bad. Suppose I am a cygwin user on a machine to which I do not
have Administrator privileges. Until now, I could run a personal sshd
on a unique port, and connect back to my windows box. Now I can't --
because, as a non-Admin, I can't create the sshd user. (and this use
case is not a hypothetical; I do this on the job often)

You can create a fake sshd account in /etc/passwd, using your own account.
Other than that, I agree. It's not exactly a nice change.

Okay, that's good to know -- we have a workaround for cygwin (assuming I
have write-access to /etc/passwd...) I still think this could cause
issues for non-priveleged uses on other platforms, tho. But that's a
topic for another list.